Global funds fall in love with Indian stocks again; buy $1 billion in equities as foreign investors rush back
Foreign investors seem to be turning bullish on Indian equities again with more than $1 billion invested in the last week. Goldman Sachs Group Inc. has projected that these overseas inflows could strengthen further as a stable rupee and improving earnings expectations are encouraging global funds to increase their exposure to Indian equities.The renewed interest from foreign investors could help extend the recovery in the benchmark NSE Nifty 50 index, which has climbed about 8% since touching a one-year low in April. Softer oil prices and the rupee’s stability have improved expectations for corporate earnings.According to data compiled by Bloomberg, overseas investors were net purchasers of Indian equities worth $1.3 billion during the four trading sessions through July 9, putting them on track for their largest weekly buying since at least June last year. Provisional figures also showed they bought an additional $272 million of domestic shares on Friday.“India’s outlook has improved in recent weeks, amid lower commodity prices, stabilized currency, resilient domestic growth, healthy earnings expectations in 2Q, and potential recovery in select domestic pockets,” Goldman Sachs strategists including Amorita Goel wrote in a note dated July 11. “With ultra-light foreign positioning, we see ample room for flows to return.”Last week, Citigroup Inc. also said Indian equities present an attractive risk-reward opportunity, noting that valuations remain reasonable while earnings estimates have held up.Despite being net buyers of Indian equities for four consecutive weeks, foreign investors are still net sellers of around $27 billion worth of stocks so far this year, according to the data.
Foreign investors rush to Indian equities
Foreign investors, who resumed buying Indian debt in June, have extended that renewed interest to equities in July. After several months of continuous selling, foreign portfolio investors (FPIs) have become net buyers this month, investing $2.59 billion (Rs 24,662 crore) during the first 10 days of July.The turnaround reflects a marked improvement in investor sentiment compared with earlier this year, when elevated valuations, global uncertainty and changing capital allocation trends led to sustained outflows. While foreign inflows in June were dominated by debt after the government and the Reserve Bank of India eased access to sovereign bonds and removed tax-related hurdles, July has seen a revival in equity investments as well. Equities accounted for $1.6 billion, or more than 61% of the total inflows during the period. Investments through the Fully Accessible Route (FAR) contributed $697 million, while debt under the general limit attracted another $340 million.The recovery has gathered pace over the past few months. Between March and May, FPIs pulled out more than $24 billion from Indian markets, including a record monthly outflow of $13.6 billion in March. Net inflows returned in June at $531 million, and the trend has strengthened further in July. Every trading session between July 1 and July 10 registered positive net inflows, culminating in investments of nearly $978 million on July 9 alone.The improvement has been particularly evident in the equity market. Foreign investors remained net sellers of Indian stocks for four straight months through June, with withdrawals exceeding $5.1 billion in June itself. In contrast, equities have emerged as the largest recipient of overseas capital in July, attracting Rs 15,157 crore (about $1.6 billion) during the first 10 days of the month.Debt has continued to draw investor interest, although the composition of those investments has evolved. Purchases through both the Fully Accessible Route and the general debt route remained robust, extending the momentum created by the sharp increase in bond inflows recorded in June.
